And while I'm griping about taxes....

Let me throw one in there for property taxes, one of what I think is the most ridiculous taxes of all.

Property tax rates vary, but mine is around 3% of the property's ad valorum value. So a $100,000 piece of land will have a tax consequence of $3,000 per year.

BUT WAIT, the property value might go up each year, so the tax consequence will go up proportionally, and you have to pay the tax every year.

It's hard to think about because it is a recurring cost, but what if we paid a "sales tax" instead of all of the recurring property taxes? What if we just went ahead and paid all those taxes today when we buy the property instead of later?

It's a little tough to calculate, but it can be done! You have to account for appreciation of the land (i'll use 4%), the time value of money for present value calculations (I'll use 10%), and the effective tax rate (I'll use 3%). With all of this in hand, I come out with an equation:

Tax=C*t*(1+j)^n/(1+i)^n
TaxRate=Tax/C

where
C= the original property value
j=capital appreciation
i=interest rate, time value of money
n=number of years


So of course the tax rate depends on how long you keep the land. So for 5 years the equivalent rate is 13%. If you owned the land for 30 years, you'd have to add on 42% to that original 30 year mortgage.

And what is the limit as n goes to infinity?

52%.

Now that's a high tax rate!

PS: That's looking on the bright side. If you looked as this tax as a capital gains tax...in other words a tax on the amount of capital appreciation...under our scenario the rate would be a whopping 78%!

How much tax ARE you paying?

Back before I paid much attention to finances and before I started paying any sizable taxes myself I didn’t think much about the US tax rate and how the government spent MY money. But as of late both taxes and government spending have REALLY begun to irk me.

Most people don’t realize just how much tax they are paying. I’ve got a simple run down from when an average American, Joe, is paid an income of $100 until he spends all of that income buying an imaginary product from a US corporation. Hopefully this should remind you of JUST HOW MUCH YOU ARE TAXED AND WHY YOU SHOULD CARE ABOUT GOVERNMENT SPENDING.

Joe makes $100 in income from the company he is working for.
Of this $100, Joe pays $25 to the IRS (25%), $10.40 to Social Security (5.4% with matching from his employer), and $2.90 to Medicare (1.45% with matching from his employer)

That leaves Joe with $61.70 left to spend.

So Joe makes a purchase for $61.70. $5.09 is paid as sales tax (8.25%) and the remaining $56.61 goes the US corporation.

So already, it has cost Joe $100 to buy $56.61 worth of goods.

BUT WAIT! It gets better

Of this $56.61 gross amount, the company profits 15% or $8.50. The remaining $48.11 is operating expenses.

Let’s say it’s 50:50 purchases and payroll on those operating expenses. The company pays property tax and purchase related taxes on the $24 purchase expenses to the tune of around $6.00. They pay payroll taxes on the remaining $24 to the tune of $9.21.

PLUS they’re taxed on those profits at 38%, or $3.23.

So the total tax paid in this scenario is a whopping $61.83!! The ACTUAL COST of the product Joe purchased was $38.18….

So due to taxes, Joe has to make $100 to purchase $38 worth of goods!!

The lesson is, you better pay attention to how the government is growing and spending your money! You’re paying more in taxes than you imagine!!

Science and Religion

Much to the dismay of many of my religious friends, I don't necessarily see major competing forces between religion and science.

Here's an interesting OpEd on the subject. I would disagree on a few points. For instance I think that science and religion to slightly overlap (as does art and science, art and religion, etc). However, I think that the main theme of the article is worth reflecting on.

Here's the link.
http://news.yahoo.com/s/usatoday/20080225/cm_usatoday/thereisalwaysthemystery;_ylt=AtPCgMNLAPTPfIGxostjFEgE1vAI